Trading Idea - Momentum Building in IMAX

Published on Friday, 30 December 2011 08:48 Written by TradersHuddle Staff

New York, December 30th (TradersHuddle.com) - Shares of Imax Corporation (NASDAQ:IMAX) closed the trading session at $18.60 placing the price action in a very tight range, given that calculated support is set at $18.57 and the calculated resistance based on an algorithm of peaks and troughs is set at $19.61

Imax Corporation (NASDAQ:IMAX) specializes in motion picture technologies and large-format film presentations. The company designs and manufactures projection and sound systems for large-screen theaters and designs custom attractions, including motion simulation theaters, for both large-scale attractions and smaller venues.

IMAX's stock price action indicates that both sellers and buyers are materializing very close to each other, which is indicative to a momentum building area, as the stock can resolve by breaking out of the tight range that developed.

Traders wanting to establish a position should place close attention to IMAX's price action, as any movement outside its predefined range of $18.57 and $19.61 could grab the attention of momentum buyers, looking for a big movement in the price of the stock. Traders need to be aware that tight range resolution works both ways, hence, a move below support at $18.57 could spark above average selling. A tiered approach can be a good way to approach starting a position in IMAX's, by establishing a starter position while the stock is in the tight range, and then adding to the position as it breaks and closes above resistance.